The global pace of the renewables build-out needs to increase by a factor of between five and seven by 2030 and by a factor of 10 by the mid-2030s if the world is to reach net zero emissions by mid-century, according to a new study by influential climate business think tank Energy Transitions Commission* (ETC).

Power sectors in developed nations should reach near-total decarbonisation by the mid-2030s, with the use of coal eliminated “almost immediately” and clear plans to phase out unabated natural gas, according to the ETC report, Making Clean Electrification Possible: 30 Years to Electrify the Global Economy.

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It adds that developing economies should commit to net-zero goals for 2060 and achieve full decarbonisation of their electricity sectors by the mid-2040s, phasing out existing coal plants in the 2030s and early 2040s.

Low-income countries, meanwhile, should aim to massively expand their clean electricity provision without ever relying on fossil fuels for power generation.

The report also explains that there must be massive investment in transmission and distribution, the electrification of transport, heating and heavy industry, and the build-up of clean hydrogen — mainly green H2 produced from renewable energy with a small proportion of blue H2 derived from natural gas with carbon capture and storage — to help decarbonise hard-to-abate sectors such as steel, shipping and aviation.

This entire energy transition will require trillions of dollars of investment, but will ultimately pay for itself, “if managed effectively”, the study says.

“These feasible objectives will only be met if countries take strong action in the 2020s, setting out both what needs to be achieved by 2030 and how they will achieve it,” it explains.

ETC director Faustine Delasalle told Upstream's sister renewable energy publication Recharge: “We can't wait until 2030 to invest massively in clean electrification and hydrogen. It needs to happen in the 2020s if we don't want to lose our chance to be on the right trajectory for a 1.5 degrees Celsius scenario.”

The study explains that, while policies to achieve these objectives will vary from country to country, there are six “critical actions” that every national government will need to implement in order to reach their emissions goals.

1) Set clear medium-term targets

Clear quantitative targets for zero-carbon electricity by 2030 are needed, such as for wind and solar capacity, or the overall emissions intensity of the grid, as well as government mandates to phase out fossil-fuel technologies by certain dates, including banning petrol and diesel road transport.

2) Build a market design that supports clean energy

Cost will not be a barrier to the massive build-out of renewable energy required, says the ETC report.

“ETC analysis shows that by 2035, total system costs of near-zero-carbon electricity systems will be fully competitive with current fossil-fuel-based costs in most geographies,” the report says, pointing out that new wind and solar power is now cheaper than new fossil-fuel power in countries containing two thirds of the global population.

Fossil-fuel subsidies that prevent renewables competing on a level playing field should be immediately scrapped, the report also advises.

But the key method to incentivise a cleaner energy system is through “appropriate” power market design.

“The biggest policy mechanism for the 2020s is... power market design and ensuring massive investments in renewables,” said Delasalle.

“Because the decarbonisation of power is the thing that can happen fastest. And it’s also what can underpin the decarbonisation of a large share of mobility, of a large share of [heating] buildings, of a large share of industry.

"It’s just the fundamental building block that underpins everything else.”

The critical component of any power market design, or regulatory framework, will be long-term contracts for renewable power, she explained.

Developers could sign long-term contracts with grids, states, utilities or large business consumers, she added.

Short-term markets would still be needed for ancillary services and to ensure grid flexibility, Delasalle said, with enough incentives in place to encourage the necessary investments in back-up energy storage or peaking plants powered by clean hydrogen/ammonia or natural-gas with carbon capture and storage.

Energy storage would be a combination of batteries — both utility-scale and in electric vehicles (EVs), more long-duration technologies such as thermal or liquid-air storage, with green hydrogen and long-distance interconnection for seasonal storage, the ETC says.

In addition, new subsidies may be required to encourage the electrification of heating and heavy industry, such as incentives for heat pumps, which are far more efficient and cheaper to run than natural-gas heating but require a large upfront cost, or to encourage steel producers to switch from coke to green hydrogen.

3) Ensure sufficient grid investment

To reach net-zero by 2050, the ETC predicts that the global electricity demand will grow from 27,000 terawatt hours today to between 90,000TWh and 130,000TWh by 2050 — largely due to the direct electrification of transport and heating, as well as indirect electrification (ie, green hydrogen).

This renewable H2 will be used directly in heavy industry and some long-distance road transport, but also as the basis for green ammonia fuel in shipping and the synthetic fuels that will be required for aviation.

This will therefore require the upgrading, expansion and digitalisation of the world’s transmission and distribution (T&D) grids on an unprecedented scale — as well as the build-out of the necessary EV charging infrastructure.

The ETC argues that with the low interest rates we are currently seeing, “funding this investment poses no macroeconomic challenge”, while adding: “But this will not occur fast enough and in an efficient fashion without clearly defined strategies and strong supporting policies.”

Ensuring that regulatory frameworks are created that enable anticipatory investment in power networks — ie, up to five years in advance of predicted growth in electricity demand — is paramount, along with “clear plans for supply-chain expansion and workforce training”, the report says.

4) Streamline planning and permitting

The ETC calls for an integrated vision for power system and network design, along with more streamlined planning, permitting and land-acquisition regulations to allow for faster build-out of renewables and T&D projects.

It recommends that countries carry out strategic assessments of the long-term need and likely locations of renewables projects, which would help “streamline permitting processes with coordination across different regulatory bodies”.

Planning and permitting processes for grid infrastructure also need reform in order to support rapid development.

5) Support clean-energy financing in developing countries

The report points out that, while affordable finance is widely available for clean-energy projects in developed countries, this is not the case elsewhere.

“In some developing and emerging economies, the cost and availability of capital could be a significant barrier to rapid growth,” the ETC says.

“[For example,] if Indian renewable power developers could access capital at the same cost as in advanced economies, bid prices at auction could fall another 25 to 30%."

It added that clean power system development for emerging economies should "be a priority focus for globally agreed flows of 'climate finance' from developed economies".

6) Support new technologies and business models

The ETC advocates for limited, but focused subsidy support for those clean technologies that are not yet cost-competitive with existing polluting solutions, such as heat pumps, next-generation batteries and electrolysers, as well as long-duration clean-hydrogen storage.

The report also says it is “critical for governments and regulators to deploy a set of enablers” to support the development of demand-side management — in which businesses or consumers reduce their electricity usage in response to price signals or feed more clean energy to the grid at times of need, via rooftop solar panels or EV batteries (vehicle-to-grid).

“[This] will require rolling out appropriate incentives within power markets (in particular real-time pricing), as well as ensuring the mandatory installation of smart capabilities (e.g. smart chargers), ease of customer use, and the development of aggregator and virtual power plant (VPP) business models,” the study states.

*The Energy Transitions Commission is a climate business think tank, which describes itself as a “global coalition of leaders from across the energy landscape committed to achieving net-zero emissions by mid-century".

It is driven by 48 commissioners who are all senior figures in the energy industry or major energy-consuming sectors such as aviation and steel. Commissioners include BP’s group chief economist Spencer Dale, Shell chairman Chad Holliday, and British businessman Adair Turner, who is a former chairman of both the UK Financial Services Authority and the Committee on Climate Change, as well as a former director-general of the UK’s influential Confederation of British Industry.

For a full list of commissioners, click here.

(This article first appeared in Upstream's renewable energy sister publication Recharge on 27 April, 2021.)